About RBI And Monetary Policy
Main Functions of Reserve Bank of India (RBI)
- Formulates implements and monitors the monetary policy.
- Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.
Regulator and Supervisor of the Financial System
- Prescribes broad parameters of banking operations within which the country’s banking and financial system functions.
- Objective: maintain public confidence in the system, protect depositors‟ interest and provide cost-effective, banking services to the public.
Manager of Foreign Exchange
- Manages the foreign exchange in accordance with the provision of Foreign Exchange Management, Act, 1999.
- Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
Issuer of Currency
- Issues and exchanges or destroys currency and coins not fit for circulation.
- Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.
- Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.
- Banker to banks: maintains banking accounts of all scheduled banks.
- Monetary policy refers to the use of instruments under the control of the central bank to regulate the availability, cost and use of money and credit.
- The goal: achieving specific economic objectives, such as low and stable inflation and promoting growth.
- Definition by wikkipidea is : Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.
The main objectives of Monetary Policy in India are
- Maintaining price stability
- Ensuring adequate flow of credit to the productive sectors of the economy to support economic growth.
- Financial stability.